JERUSALEM – Cash strapped Israeli airline El Al said on Tuesday it signed a non-binding deal for a $130 million loan from insurer Phoenix Group.
Israel’s flag carrier will pay interest of 5.5% to 7% in the loan, in which final details still need to be worked out, it said in a regulatory filing in Tel Aviv.
El Al will put up its Matmid frequent flier club as collateral for the loan. Phoenix will have an option to buy 25% of Matmid by the end of 2027.
Sales plummeted at El Al amid restrictions imposed during the pandemic to curb the spread of COVID-19. Israel only recently opened its borders to foreign tourists, allowing El Al to narrow its net loss in the fourth quarter to $110 million from $140 million a year earlier.
The loan is part of a government bailout package, in which El Al was forced to lay off one-third if of its workforce and trim its fleet. The state, which gave El Al a $210 million aid package last year, also required El Al to inject more cash into the airline, either by selling a stake in Matmid or securing a loan using Matmid as collateral.
The two parties have 90 days to reach a final loan agreement and El Al is restricted from taking out additional loans.
Ad: Save every day with Amazon Deals: Check out today's daily deals on Amazon.
(Reporting by Steven Scheer; Editing by Ari Rabinovitch)